By Patrick Connole
WASHINGTON (Reuters) - Top Clinton administration officials, California
power executives and state lawmakers ended a marathon seven-hour
meeting late Tuesday with what they described as a broad plan to work together
to avoid bankruptcy for the state's two biggest utilities.
The session was called by Treasury Secretary Lawrence Summers and Energy Secretary Bill Richardson to prevent reverberations throughout the U.S. economy from California's severe shortage of electricity and skyrocketing wholesale prices that utilities must pay on the spot market.
"I think the most important thing that got acomplished was we could see light at the end of the tunnel," California Gov. Gray Davis, a Democrat, told reporters after the meeting.
"This problem will never go away unless we can diminish our reliance on the spot market. That is best done through long-term contracts," he said.
PG&E Corp and Edison International's SoCal Edison have run up some $12 billion in unexpected costs in recent months because the state's 1996 deregulation law does not allow them to pass through wholesale price increases to consumers.
MORE MEETINGS WEDNESDAY
The two dozen executives and officials ended the meeting at midnight and released a statement outlining a broad framework of what was needed to solve the crisis.
Those items included developing ways to help utilities negotiate long-term contracts to buy electricity and the williness of power marketers to provide "forebearance" of amounts owed by PG&E Corp and SoCal Edison.
A round of technical talks with aides was scheduled for Wednesday. Top officials were to meet again this weekend to finish writing details of the agreement.
The vaguely-worded statement also said participants agreed on the need for cooperation "to better match supply and demand" in the state.
The California power crisis prompted the administration to step in in an attempt to mediate a way to save consumers from electricity blackouts, utilities from bankruptcy and the nation from what could be a widening economic spillover if the situation hits banks and other groups.
Executives from SoCal Edison and PG&E Corp attended the meeting, along with officials from out-of-state power marketing companies such as Duke Energy and the Southern Companies.
"All sides gave a bit," said Richardson.
"Seven hours -- tough discussions, but progress was made," he added wearily.
There was no immediate word on what action, if any, would be taken on the issue of a regional price cap on wholesale power prices. That concept has been endorsed by Richardson and California officials as a way to give utilities some breathing room, but it is opposed by the Federal Energy Regulatory Commission.
The statement, issued by the participants. said only that the power problems must be addressed while taking into account the "regional nature" of the California market.
STATE LAWMAKERS PLAN LEGISLATION
Republican Bill Campbell, the minority leader of the California State Assembly, agreed that the meeting was useful.
"We're heading back to California and we've got work to do in the legislature now," Campbell told reporters. "Some of it would be related to implementing what we discussed even tonight."
Some experts said they expected little from the meeting.
Steven Fleishman, electricity analyst for Merrill Lynch, said actions, not words, were needed from state and federal officials to solve short- and long-term electricity troubles.
"While the hope is a solution to the crisis ... we are not optimistic that a clear solution will come out of these meetings," Fleishman wrote in a commentary on the crisis.
On Monday, Davis called the state's experiment with electricity deregulation "a colossal and dangerous failure" and outlined a number of moves he said would improve power supplies in California. Wall Street was unimpressed with the governor's promise, and stock prices for PG&E and Edison International declined Tuesday.
The question of deregulation is under threat as a result, with Davis and others saying that without bold action to impose a regional power price cap, a consumer revolt would occur and return the state to regulated power service.
Davis repeated his pledge to set aside $1 billion in his budget to help bring new power plants on line and promote energy conservation. He also said he would push for overhauling the "crazy" bidding process for electricity, and put more public advocates on the governing boards of the Independent System Operators.
Separately on Monday, Southern California Edison said a federal court had upheld its right to recover reasonable costs it incurred in purchasing power for its customers. The company is suing the CPUC, seeking the right to recover from customers about $5 billion it spent on purchasing power.
2. "Export of Electric Power from California to Mexico".
3. "Export of Natural Gas from California to Mexico".